A new year always raises the question of how to plan for the twelve months ahead, and, indeed, beyond.
At the heart of any long term planning should be the subject of transitioning management and ownership of your business to the next generation, also known as succession.
Succession planning is important because it tackles legal and family issues before they become an issue. It permits the transfer of your farm on your terms, and incentivises young farmers with a clear path for their future. It is important to note that financial dependants could claim against your estate in the future if you fail to properly provide for them. Yet, a 2012 survey of arable and dairy farmers found that nearly half, 44%, had no formal succession plan.
While it may seem like a daunting prospect, with the right advice and support, a sound succession plan can be put in place.
I would suggest that there are four key steps involved in the process:
l Collecting Information
You can only make the right decisions for your farm and your family with a firm grasp of all the facts.
You should find out:
l The location of your title deeds.
l The nature of the security for any farm debts (e.g. mortgage, notice of deposit).
l The approximate value of your farm.
l The original cost of your land and buildings.
l How your business is held (e.g. sole proprietor, partnership or limited company).
l How the farm assets are registered (e.g. are they part of the company assets? Joint tenants or tenants in common).
l Details of life insurance policies.
l Review the Critical
While there are many matters to consider, some require extra thought and attention, including:
l Control: Is it important for you to continue controlling the farm for a period of time? Your experience can help “oil the wheels” of the transition.
l Ownership: Is there to be a full scale transfer immediately or is the process to be phased?
l Security: What income must you receive from the farm to secure your future?
l On-Farm Living: Will you stay on or move from the farm and how would any move be financed?
l Equal versus Equitable Treatment of Children: Consider how best to divide your assets where non-farming children are involved. Remember, an equitable arrangement is not necessarily an equal one.
l Set Goals
You should clarify your “wants” and your “needs”. Succession planning can be tricky, and while some of your wants may have to be sacrificed, your needs must never be.
l Choose the Best Option for You
There is no “one size fits all” approach. Consult your advisors to make sure your solution fits your situation, because succession planning is not only about securing your farm’s future, it is about securing yours too.
Kate Ervine is a Director in Commercial Property and Probate at Portadown based Solicitors Firm JPH Law Limited.
For further information on JPH Law visit: www.jphlaw.co.uk or contact Kate on firstname.lastname@example.org T 028 38 333 333.